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Most of us risk being taxed on our income, our capital gains and the value of our estate when we die. It is worth getting a clear grasp of how these taxes work and then discussing with us the most tax efficient financial planning for you.
Income Tax
The single person’s income tax allowance for the year to 5th April 2008/2009 is £5,435 (07/08-£5,225). If your total income is less than this during the tax year then there is no tax to pay.
Income Tax Bands 2007-2009
|
2008-2009 |
2007-2008 |
Rate |
Band (£) |
Band (£) |
Starting Rate 10% |
2,320* |
2,230 |
Basic Rate 20% |
2,320-36,000 |
2,230-34,600 |
Higher Rate 40% |
Over 36,601 |
Over 34,601 |
* Only applicable where taxable non-savings income is under £2,320.00.
The self-employed can claim business expenses against their income. So make sure you include all possible justifiable business expenses on your self-assessment form. This also applies to capital allowances for expenditure on plant and equipment, including computers and tools, for example, used for your business.
Don’t forget pension payments either. You may be able to pay further contributions to your pension, which can soak up some unused tax relief.
One other point to remember, if one spouse is a tax payer and the other is not or pays tax at a lower rate it is worth considering switching some investments to take advantage of their unused tax allowances.
Capital Gains Tax
In the tax year to 5th April 2008-2009 the CGT allowance is £9,600 (2007-2008 £9,200).
This means that you do not have to pay tax on gains from buying and selling shares or other investments during the tax year up to that amount. Remember also that you do not normally have to pay tax on any gain you make when you sell your main residence.
If you have used your CGT allowance, don’t forget your ISA allowance. A maxi ISA can shelter capital gains and dividends on investments, for example shares, worth up to £7,200 per year. |
